Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
PETITIONER:
P. L. BAPUSWAMI
Vs.
RESPONDENT:
N. PATTAY GOUNDER
DATE OF JUDGMENT:
07/12/1965
BENCH:
RAMASWAMI, V.
BENCH:
RAMASWAMI, V.
SIKRI, S.M.
SUBBARAO, K.
SHAH, J.C.
SIKRI, S.M.
GAJENDRAGADKAR, P.B. (CJ)
WANCHOO, K.N.
SATYANARAYANARAJU, P.
CITATION:
1966 AIR 902 1966 SCR (2) 918
ACT:
Transfer of Property Act, 1882, s. 58(c)-Distinction between
Mortgage by conditional sale and a sale with a clause for
repurchase.
HEADNOTE:
M executed a document Ex. B-1 on May 28, 1946, in respect
of his half share in certain lands in favour of the
defendant for a consideration of Rs. 4,000/-. The document
was in the form of a sale deed but it contained a
stipulation that the defendant should reconvey the property
to M on his repaying the amount of Rs. 4,000/- after five
years and before the end of the seventh year. After M’s
death his sons executed an assignment deed in favour of the
plaintiff in August 1950 for a sum of Rs. 1,600/- and on the
basis of this deed, the plaintiff filed a suit for re-
demption of the disputed property. He claimed, inter alia,
that Ex. B-1 must be deemed in law to be a mortgage by
conditional sale and that he was entitled to redeem as the
assignee of the equity of redemption; or alternatively, that
Ex. B-1 was a sale with a condition to repurchase and the
defendant was bound to reconvey the property to him on
payment of Rs. 4,000/- and that although this amount had
been tendered several times, the defendant had refused to
accept it. On the other hand the defendant denied that Ex.
B-1 was a mortgage by conditional sale and contended that it
was an outright sale with a covenant for repurchase and as
the plaintiff did not tender the amount within the time
stipulated in the document, the suit was barred by time.
The trial court held that Ex. B-1 was a mortgage by
conditional sale and granted a preliminary decree; but the
High Court, in appeal, reversed this decision. On appeal to
this Court,
HELD : Ex. B-1 was a transaction of mortgage by conditional
sale and not a sale with a condition for retransfer.
The question whether by the incorporation of a condition a
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
transaction ostensibly of sale may be regarded as a mortgage
is one of intention of the parties to be gathered from the
language of the deed interpreted in the light of the
surrounding circumstances. The definition of a mortgage by
conditional sale postulates the creation by the transfer of
a relation of mortgagor and mortgagee, the price being
charged on the property conveyed. In a sale coupled with an
agreement to reconvey there is no relation of debtor and
creditor nor is the price charged upon the property
conveyed, but the sale is subject to an obligation to
retransfer the property within the period specified. The
distinction between the two transactions is the relationship
of debtor and creditor and the transfer being a security for
the debt. [921 C-F]
In the present case the following circumstances indicated
that the transaction was a mortgage by conditional sale :-
(i) As required by the proviso to s. 58(c).
the condition for repurchase was embodied in
the same document;
(ii) the consideration for Ex. B-1 was Rs.
4,000/. while the real value of the property
was Rs. 8,000/-;
919
(iii)the patta was not transferred to the
defendant after the execution of Ex. B-1 by
M;
(iv) M, and after his death, his sons,
continued to pay kist for the land; and
(v) the consideration for reconveyance was
the same amount as the consideration for Ex.
B-1, i.e. Rs. 4,000/-. [923 B-G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 798 of 1963.
Appeal by Special Leave from the judgment and
Order dated the 19th August, 1960 of the
Madras High Court in Second Appeal No. 871 of
1958.
R. Ganapathy lyer, for the appellant.
C. B. Agarwala and R. Gopalakrishnan, for
the respondent.
The Judgment of the Court was delivered by
Ranmswami, J. This appeal is brought, by
special leave, on behalf of the plaintiff from
the judgment of the High Court of Madras dated
August 19, 1960 in Second Appeal no. 871 of
1958.
The disputed property consisted of 16 acres
and 27 cents of land in Sokkanur village of
Coimbatore district of which half share
belonged to Palani Moopan and the other half
to his daughter Palani Mooppachi. Palani
Moopan executed the document-Ex. B-1 with
regard to his share of the property in favour
of the 1st defendant for a consideration of
Rs. 4,000/on May 28, 1946. Out of the
consideration, a sum of Rs. 2,000/was reserved
with the vendee to pay off an earlier mortgage
and the balance of Rs. 2,000/- was paid to the
vendor in cash. The first defendant
discharged the earlier mortgage in accordance
with the directions in Ex. B-1. The
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
document, B-1 was in the form of a sale deed
but it contained a stipulation that the 1st
defendant should reconvey the property to
Palani Moopan on his repaying the amount of
Rs. 4,000/- after 5 years and before the end
of the 7th year. After the death of Palani
Moopan his sons executed an assignment deed in
favour of the plaintiff, Ex. A-1 dated August
10, 1950 for a sum of Rs. 1,600/-. On the
basis of Ex. A-1 the plaintiff has brought
the present suit for redemption of the
disputed property. The case of the plaintiff
was that Ex. B-1 must be deemed in law to be a
mortgage by conditional sale and that he was
entitled to redeem as the assignee of the
equity of redemption. The plaintiff further
claimed that being an agriculturist, he was
entitled to the benefits of Madras Act TV of
1938 as amended. The plaintiff pleaded
alternatively that if
Sup.Cl/66 12.
920
Ex. B-1 was held to be an out right sale with
a condition to repurchase, the first defendant
was bound to reconvey the property to him on
payment of the amount of Rs. 4,000/-. The
plaintiff alleged that he tendered the amount
to the first defendant several times but the
latter refused to accept the same. The suit
was contested by the 1st defendant who denied
that Ex. B-1 was a mortgage by conditional
sale. It was alleged that Ex. B-1 was an out
right sale with a covenant to repurchase and
as no tender was made by the plaintiff within
the time stipulated in the document, the suit
was barred by time.
Upon these rival contentions the trial court
held that Ex. B-1 was a mortgage by
conditional sale and accordingly granted a
preliminary decree to the plaintiff for
redemption under O. 34. r. 7 of the Civil
Procedure Code. The first defendant took the
matter in appeal to the Subordinate Judge of
Coimbatore but the appeal was dismissed. The
1st defendant preferred second appeal in the
Madras High Court which set aside the decrees
of the lower Courts and ordered that the suit
should be dismissed, holding that the
transaction was an out right sale and
not a
mortgage by conditional sale. As regards the
alternative plea based on the covenant for
reconveyance, the High Court considered that
there was no proof that the plaintiff had
tendered the amount within the period
stipulated in the document.
The question of law involved in this appeal is
whether the document, Ex. B-1 executed by
Palani Moopan in favour of the 1st defendant
is, in its true effect, a mortgage by
conditional sale or a sale with a condition
for retransfer.
By s. 58(c) of the Transfer of Property Act a
mortgage by conditional sale is defined as
follows :
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
"58. (c) Where the mortgagor ostensibly sells
the mortgaged property-
on condition that on default of payment of the
mortgaged-money on a certain date the sale
shall become absolute, or
on condition that on such payment being made
the sale shall become void, or
on condition that on such payment being made
the buyer shall transfer the property to the
seller,
the transaction is called a mortgage by
conditional sale and the mortgagee a mortgagee
by conditional sale:
921
Provided that no such transaction shall be
deemed to be a mortgage, unless the condition
is embodied in the document which effects or
purports to effect the sale."
The proviso to this clause was added by Act 20 of 1929.
Prior to the amendment there was a conflict of decisions on
the question whether the condition contained in a separate
deed could be taken into account in ascertaining whether a
mortgage was intended by the principal deed. Legislature
resolved this conflict by enacting that a transaction shall
not be deemed to be a mortgage unless the condition referred
to in the clause is embodied in the document which effects
or purports to effect the sale. But it does not follow that
if the condition is incorporated in the deed effecting or
purporting to effect a sale a mortgage transaction must of
necessity have been intended. The question whether by the
incorporation of such a condition a transaction ostensibly
of sale may be regarded as a mortgage is one of intention of
the parties to be gathered from the language of the deed
interpreted in the light of the surrounding circumstances.
The definition of a mortgage by conditional sale postulates
the creation by the transfer of a relation of mortgagor and
mortgagee, the price being charged on the property conveyed.
In a sale coupled with an agreement to reconvey there is no
relation of debtor and creditor nor is the price charged
upon the property conveyed, but the sale is subject to an
obligation to retransfer the property within the period
specified. The distinction between the two transactions is
the relationship of debtor and creditor and the transfer
being a security for the debt. The form in which the deed
is clothed is not decisive. The question in each case is
one of determination of the real character of the
transaction to be ascertained from the provisions of the
document viewed in the light of surrounding circumstances.
If the language is plain and unambiguous it must in the
light of the evidence of surrounding circumstances be given
its true legal effect. If there is ambiguity in the
language employed, the intention may be ascertained from the
contents of the deed with such extrinsic evidence as may by
law be permitted to be adduced to show in what manner the
language of the deed was related to existing facts. In the
present case, the document Ex. B-1 reads as follows
"................................
I have settled to sell to you on this day for
a suit
of Rs. 4,000-0-0 the undermentioned immovable
pro-
922
perties and have received the consideration of
rupees four thousand only, as detailed below
:-
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
In the matter of my having directed you
yourself to pay the sum of Rs. 2,000/-, being
my half share payable towards the usufructuary
mortgage deed executed on 7th September 1944,
in respect of the share of properties detailed
below and in respect of some other share of
properties, jointly by me and Palani
Mooppachi, wife of one Palani Mooppan of the
aforesaid place in favour of M. Maniyam P. V.
Ramaswami Goundar, son of Venkatachala
Goundar, residing in Pattampalayam village
cusba, Palladam taluk, for a sum of Rs.
4,000/- and registered as Document no. 1122 of
1944, Book 1, Volume 210, pages 415 and 416 in
the Office of the Sub-Registrar of Kunnathur
to the aforesaid usufructuary mortgagee, get
release of the properties mentioned herein and
take possession of the same, the amount
received by me is Rs. 2,000/-. The amount
which I have received in cash on this day is
Rs. 2,000/-. As, in all, I have received the
sale consideration of Rs. 4,000/- as detailed
above, you yourself shall, in future, hold and
enjoy absolutely the undermentioned
properties. In future, neither myself nor my
heirs shall have any right or future claim,
whatever, in respect of these properties.
There is no other encumbrance, whatever,
except the encumbrance mentioned above, in
respect of these properties. In case anything
is left out, I am bound to get the same
discharged from and out of my other
properties.
Whereof, in all these, and in the well in good
condition, situate in Government Survey no.
93/1 and in the cocoanut, palmyrah, tamarind
and wood-apple trees and in the fruit bearing
and timber trees, which are in the aforesaid
fields, the half-share in common. In future I
have neither share nor right, whatever, in the
aforesaid fields. The aforesaid Palani
Mooppachi shall discharge the above mentioned
balance usufructuary mortgage amount of Rs.
2,000/- from and out of the balance of the
usufructuary of mortgage properties. Should I
pay in cash the aforesaid sale consideration
of rupees four thousand after a period of five
years within a period of seven years from the
date of
923
the execution of the deed, during the date of
expiry of the said deed of any year (the said
properties) should be reconveyed for the very
same amount to me. This condition is not
valid after the aforesaid period."
We consider that in the present case there are several cir-
cumstances to indicate that Ex. B-1 was a transaction of
mortgage by conditional sale and not a sale with a condition
for, retransfer. In the first place, there is the important
circumstance that the condition for repurchase is embodied
in the same, document. In the second place, there is the
significant fact that the consideration for Ex. B-1 was Rs.
4,000/-, while the real value of the property was, according
to the Munsif and the Subordinate Judge, Rs. 8,000/-. The
High Court has dealt with this question and reached the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
finding that the value of the property was Rs. 5,5001-, but
it is submitted by Mr. Ganapathi lyer on behalf of the
appellant that the question of valuation was one of fact and
the High Court was not entitled to go into the question in
the second appeal. The criticism of learned Counsel for the
appellant is justified and we must proceed on the basis that
the valuation of the property was Rs. 8,000/- and since the
consideration for Ex. B-1 was only Rs. 4,000/- it was a
strong circumstance suggesting that the transaction was a
mortgage and not an out right sale. In the third place,
there is the circumstance that the patta was not transferred
to the 1st defendant after the execution of Ex. B-1 by
Palani Moopan. It appears that defendant no. I did not
apply for the transfer of patta and the patta admittedly
continued in the name of Palani Moopan even after the
execution of Ex. B-1. Exhibits A-6 and A-7 are certified
copies of thandal extract of patta for the years 1945-54 and
they prove this fact. These exhibits also show that the
plaintiff had obtained patta for the land on the basis of
Ex. A-2. The registered deed of transfer of patta was
executed by the sons of Palani Moopan in favour of the
plaintiff. There is also the circumstance that the, kist
for the land was continued to be paid by Palani Moopan and
after his death, by the sons of Palani Moopan. Lastly,
there is the important circumstance that the consideration
for reconveyance was Rs. 4,000/-, the same amount as the
consideration for Ex. B-1. Having regard to the language
of the document, Ex. B-1 and examining it in the light of
these circumstances we are of the opinion that the
transaction under Ex. B-1 was mortgage by conditional sale
and the view taken by the High Court with regard to the
legal effect of the transaction must be reversed. It
follows, therefore, that the plaintiff is entitled to a
preliminary decree for redemption under 0. 34. r. 7, Civil
Procedure Code,
924
for taking accounts and for declaration of the amounts due
to the 1st defendant under Ex. B-1.
For these reasons we set aside the judgment and decree of
the High Court and. restore the judgment and decree of the
Subordinate Judge of Coimbatore granting the plaintiff a
preliminary decree for redemption of the mortgage. A period
of six months is granted for payment of the amount under the
preliminary decree.
The appeal is accordingly allowed with costs.
Appeal allowed.
925